25 Percent Increase in Earnings Per Share, Exclusive of Impact of Redemption and Changes in Accounting

South San Francisco, Calif. -- January 16, 2002 --

Genentech, Inc. (NYSE: DNA) today announced a 25 percent increase in earnings per share and a 27 percent increase in revenues driven by a 36 percent increase in product sales for 2001, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment1 and the cumulative effect of accounting changes2,3.

For 2001, including the three months ended December 31, 2001:

Earnings per share for 2001 increased 25 percent to 76 cents per share, compared to 613 cents per share for 2000, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment and the cumulative effect of accounting changes. Excluding these charges, earnings per share for the fourth quarter of 2001 also increased 25 percent to 20 cents per share, compared to 16 cents per share in the fourth quarter of 2000. Including these charges, earnings (loss) per share for 2001 and 2000 were 28 cents per share and (14) cents per share, respectively, and earnings per share for the fourth quarter of 2001 and 2000 was eight cents per share and three cents per share, respectively

Net income for 2001 increased 24 percent to $404.5 million, compared to $325.13 million for 2000, exclusive of the ongoing impact of the 1999 redemption of Genentech's Special Common Stock and related accounting treatment and the cumulative effect of accounting changes. Excluding these charges, net income for the fourth quarter of 2001 increased 28 percent to $106.4 million from $83.4 million in the fourth quarter of 2000. Including these charges, net income (loss) for 2001 and 2000 was $150.3 million and ($74.2) million, respectively, and net income for the fourth quarter of 2001 and 2000 was $42.1 million and $14.3 million, respectively.

Revenues for 2001 increased 27 percent to $2,212.3 million from $1,736.4 million in 2000. This revenue growth was driven primarily by sales of Genentech's BioOncology products, Rituxan® (Rituximab) and Herceptin® (Trastuzumab). Total product sales increased 36 percent in 2001 to $1,742.9 million from $1,278.3 million in 2000.

"2001 was a very good year for Genentech with significant progress on all fronts. Our performance continues to be driven by robust sales of our innovative oncology products which have helped nearly double our revenues in a three-year time period. With approximately 20 active projects in development and ten products on the market, Genentech continues to drive strong, sustainable top- and bottom-line growth," said Arthur D. Levinson, Ph.D., Genentech's chairman and chief executive officer. "With the potential to launch as many as six new products or new indications for existing products in 2003 dependent on clinical success and regulatory approval, we are very well positioned to continue to deliver strong results. Achieving even three or four of these launches in 2003 would represent a major accomplishment."

Product Sales

Marketed products sales increased 36 percent in 2001 to $1,742.9 million from $1,278.3 million in 2000, with biooncology sales consisting of 67 percent of total product revenues, up from 56 percent in 2000.

Rituxan sales in 2001 increased 84 percent to $818.7 million from $444.1 million in 2000. This sales increase is due primarily to increased market penetration for the treatment of non-Hodgkin's lymphoma.

Herceptin sales in 2001 increased 26 percent to $346.6 million compared to $275.9 million in 2000. In the fourth quarter of 2001, Genentech moved to a different distribution process for Herceptin utilizing wholesale distributors rather than direct shipment by the company. As is typical with this process, Herceptin was ordered by the wholesalers in order for them to stock sufficient inventory to assume product distribution.

During 2001, combined sales of Genentech's three cardiovascular products, Activase® (Alteplase, recombinant), TNKase (Tenecteplase) and Cathflo Activase® (Alteplase), decreased four percent to $197.1 million compared to $206.2 million in 2000.

Growth hormone sales during 2001 increased 10 percent to $250.2 million compared to $226.6 million in 2000.

Pulmozyme® (dornase alfa) Inhalation Solution sales were $122.9 million in 2001 as compared to $121.8 million in 2000.

Total Costs and Expenses

Costs and expenses increased as anticipated in 2001 as compared to 2000.

Research and development (R&D) expenses increased in 2001 to $526.2 million compared to $489.9 million in 2000. R&D expenses as a percent of revenues in 2001 were 24 percent, compared to 28 percent in 2000. R&D expenses as a percent of revenues are expected to continue to vary over the next several periods dependent on possible in-licensing agreements and as products progress through late-stage clinical trials.

Primarily due to the increase in product sales, cost of sales increased to $354.5 million in 2001 from $272.0 million, exclusive of expenses related to the redemption and push-down accounting recorded in 2000.

Marketing, general and administrative (MG&A) expenses increased during 2001 to $474.4 million compared to $368.2 million in 2000 primarily due to increased promotional programs, pre-launch commercial activities, investment write downs and higher royalty expenses.

Collaboration profit-sharing expenses increased to $246.7 million in 2001 from $128.8 million in 2000. The increase was due primarily to increased Rituxan profit-sharing expense due to higher Rituxan sales.

Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures, and markets human pharmaceuticals for significant unmet medical needs. Fifteen of the currently approved biotechnology products stem from or are based on Genentech science. Genentech manufactures and markets ten biotechnology products directly in the United States. The company has headquarters in South San Francisco, California, and is traded on the New York Stock Exchange under the symbol DNA.

The accounting treatment under U.S. Generally Accepted Accounting Principles (GAAP) requires Genentech to establish a new accounting basis for the company's assets and liabilities. This accounting treatment is the result of Roche's exercise of its option to redeem Genentech's Special Common Stock in June 1999. The company's new accounting basis is based on the cost of Roche's 1990 through 1997 purchases of Genentech shares and the redemption of Genentech's Special Common Stock on June 30, 1999. Roche's cost of acquiring Genentech was "pushed down" to Genentech and reflected on Genentech's financial statements beginning June 30, 1999. The effect of push-down accounting on Genentech's 2001 and 2000 consolidated statements of operations include recurring charges for the amortization of goodwill and other intangibles and for 2000, the costs related to the sale of inventory that was written up at the redemption.

Genentech adopted Statement of Financial Accounting Standard 133 on Accounting for Derivative Instruments and Hedging Activities (FAS 133) on January 1, 2001, and recorded a cumulative effect of a change in accounting principle related to recording derivative instruments at fair value. As a result of the adoption and the changes in fair value of these derivative instruments during 2001, the net of tax impact of FAS 133 was not material.

Genentech adopted Securities and Exchange Commission's Staff Accounting Bulletin No. 101 on Revenue Recognition effective January 1, 2000, and recorded a cumulative effect of a change in accounting principle related to contract revenues recognized in prior periods. The related deferred revenue is being recognized over the term of the agreements. As a result, 2001 and 2000 include the recognition of such previously deferred revenues.

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Webcast:

Genentech will be offering a live webcast of a discussion by Genentech management of the earnings and other business results on Wednesday, January 16, 2002 at 2:30pm PT. The live webcast may be accessed on Genentech's website at http://www.gene.com. This webcast will also be available after the call via the website until close of business January 23, 2002. An audio replay of the webcast will be available beginning at 4:30pm PT on January 16, 2002 until 4:30pm PT January 23, 2002. Access numbers for this replay are: 1-800-633-8284 (domestic) and 1-858-812-6440 (international); passcode number is 20102634.

Genentech Business and Product Development Events in the Fourth Quarter, 2001 and early 2002

Marketed and Pipeline Product Events

Oncology

Herceptin® (Trastuzumab): Received U.S. Food and Drug Administration (FDA) approval to add median survival data into the package insert of Herceptin. The new labeling references the 24 percent increase in median overall survival for women with HER2 positive metastatic breast cancer treated initially with Herceptin and chemotherapy compared to chemotherapy alone. Also announced that an FDA advisory committee unanimously recommended including new information to physicians using Herceptin about a gene-detection test called FISH that identifies women with metastatic breast cancer who could benefit from Herceptin therapy.

Rituxan® (Rituximab): With partner IDEC Pharmaceuticals Corporation, announced initial positive results of three studies presented at the annual meeting of the American Society of Hematology (ASH) that examine the role of Rituxan alone and in combination with chemotherapy as early front-line treatment for newly-diagnosed patients with chronic lymphocytic leukemia. Also at ASH, with IDEC and Roche, announced the results of a study evaluating the combination of Rituxan and chemotherapy indicated potential extended survival benefit in patients with aggressive non-Hodgkin's lymphoma (NHL). In addition, at ASH, a separate study of the first-ever Rituxan plus chemotherapy trial in indolent (low grade) NHL was announced with positive results.

Anti-CD40: Entered clinical development at Genentech. The product candidate, PRO64553, is a humanized monoclonal antibody targeted to CD40 and is being developed for the treatment of various hematologic malignancies.

Cardiovascular Disease

Tracleer (Bosentan): Approved for pulmonary arterial hypertension in November 2001 and is currently being marketed in the United States by Actelion.

Immunological Disease

Xolair (Omalizumab): With partner Novartis Pharmaceuticals Corporation, announced plans to submit an amendment to the Biologics License Application (BLA) for Xolair to the FDA in the fourth quarter 2002. The announcement updates and clarifies submission expectations originally outlined by the companies in July 2001. The content of the Xolair BLA amendment will address requests for additional information made by the FDA in a Complete Response letter issued in July 2001.

Xanelim (Efalizumab): With partner XOMA Ltd., announced that an additional pharmacokinetics study, to be included in the potential BLA submission to the FDA for Xanelim, will delay the estimated filing date to summer 2002.

Rituxan: With IDEC, announced positive preliminary results from two investigational studies presented at ASH examining the role of Rituxan in the treatment of immune thrombocytopenic purpura (ITP), an autoimmune disorder characterized by bruising and abnormal bleeding. In early 2002, Rituxan for the treatment of ITP was added to Genentech's development pipeline; this is the first development of Rituxan for an autoimmune and non-malignant disorder.

Corporate Events

Announced that the United States Patent and Trademark Office granted Genentech and the City of Hope a patent relating to fundamental methods and compositions used to produce antibodies by recombinant DNA technology. The decision follows almost 10 years of proceedings in the Patent Office and in the United States District Court to determine whether the invention covered by the patent was invented first by scientists at Genentech and City of Hope National Medical Center or by scientists at Celltech in England.

Announced a program for the repurchase of up to $625 million of the company's common stock over the next year. Genentech intends to use repurchased stock to offset dilution caused by the issuance of shares in connection with Genentech's employee stock plans.

Announced four senior appointments in the company's Development and Product Operations organizations. Paula Jardieu was promoted to senior vice president, Development Sciences; Frank Jackson assumed the role of vice president, Vacaville Product Operations; Bernice Welles was appointed vice president, Product Development; and Ronald Branning joined the company in the role of vice president, Global Quality.

Announced that a Los Angeles County Superior Court jury was unable to reach a verdict, and consequently unable to find any liability for Genentech, in a contract dispute lawsuit brought by the City of Hope (COH) against Genentech relating to a 1976 agreement covering sponsored research performed by two COH scientists, Arthur Riggs and Keiichi Itakura. A retrial is expected in March, 2002.

Announced that Genentech was named one of the "100 Best Companies for Working Mothers," in the October issue of Working Mother Magazine. This was the 10th time the company has made the list.

The statements made in this press release relating to strong, sustainable financial growth, the potential launch of six new products or new indications for existing products in 2003 and the estimated BLA filing time frames for Xanelim and Xolair are forward-looking and actual financial performance, number of products launched and timing of launch dates and filing dates could differ materially. Among other things, the filing timeframes could be impacted by unexpected safety issues, poor efficacy or pharmacokinetic results and additional time requirements for data analysis, BLA preparation, discussions with the FDA, additional clinical studies or manufacturing process modifications; the number of product launches and launch dates could be impacted by all of the foregoing and FDA actions or delays, failure to receive FDA approval and manufacturing problems; and the financial performance could be impacted by all of the foregoing and competition, pricing, costs of sales and R&D expenses.

(1) Pro Forma amounts exclude recurring charges related to the redemption, costs in 2000 related to the sale of inventory that was written up at the redemption and their related tax effects. In addition, pro forma excludes the cumulative effect of the changes in accounting principle net of tax, adopted in 2001 and 2000, and the changes in fair value of certain derivatives ($10.0 million) recorded in contract and other revenues in Q1 2001 under Statement of Financial Accounting Standards No. 133 (FAS 133) on Accounting for Derivative Instruments and Hedging Activities. Genentech recorded a cumulative effect of a change in accounting principle for its adoption of FAS 133 on January 1, 2001, and also for its adoption of the SEC's Staff Accounting Bulletin No. 101 (SAB 101) on Revenue Recognition on January 1, 2000.

(2) The pro forma results for the twelve-months ended December 31, 2000 include the effect of the adoption of SAB 101 on January 1, 2000.